Carbon Footprints Now Come Standard for Benchmarks Like S&P 500

Environmental due diligence is a critical component of any property transaction where potential environmental risks are a concern—minimize risks and protect yourself from...

By Andrea Vittorio

Carbon footprints and other related metrics now are shown alongside financial data for popular stock market benchmarks like the S&P 500 and Dow Jones Industrial Average.

S&P Dow Jones Indices, the first index provider to include such information among standard metrics published online, said it did so in response to increasing interest from investors, banks, insurers, and others concerned about climate change.

“All types of finance sector participants are quickly realizing the need to understand, assess, and manage the carbon inherent in their investments for many reasons, including responding to their own clients’ requests for carbon transparency,” S&P Dow Jones Indices’ Hannah Skeates, who is responsible for developing new strategy indices and indices based on environmental, social, and governance considerations, said in an Oct. 30 email to Bloomberg Law.

“Being able to explicitly integrate carbon in decision-making allows them to assess and communicate a more rounded picture to their clients, one which understands environmental characteristics to be increasingly important,” Skeates said.

The index provider also countered the worry that incorporating environmental considerations into an index may hurt financial performance. Low-carbon versions of the S&P 500 in the U.S. and the S&P Global 1200 actually have outperformed their benchmarks over the past five years, according to research released as part of the announcement.

The carbon metrics come from Trucost, an environmental data and analysis firm that S&P Dow Jones Indices bought a controlling stake in a year ago.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Try Environmental Due Diligence Guide™ and Environmental Due Diligence Guide Report™